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How to trade forex the right way ??

  • #1
  • First Post: Jun 2, 2007 5:24am Jun 2, 2007 5:24am
Hey Guys....

I've been wondering how we must trade forex

well we all know there are a lot of fancy indic here in FF
and a lot of systems also.....

but do u really think that all the big player out there using this similiar kind of stuff like we do ??

are they using any indicator on their trade ?
or their simply using trendline, fib, S/R ??


cuz i've heard a lot of people say if you want to trade then K.I.S.S

so what is the real matter in trading anyway ??
is it indic that create a systems ?
is it MM ?
is it yourself ??
is it the trading tools you use ??
is it the price action ?

cuz if you mix all of it then it would not be simple anymore, it will be far away too complicated to understand.... and don't forget the subjectivity on using one of those

so please give me some advice
i've been trap in confusion lately......

thx
Every moment in the market is unique
  • #2
  • Jun 2, 2007 5:25am Jun 2, 2007 5:25am
Oooppsss i forgot,

sorry for my bad english
Every moment in the market is unique
  • #3
  • Jun 2, 2007 8:18am Jun 2, 2007 8:18am
let me share my recent "eureka" story.

i've read and watched countless of forex tutoring videos and they all helped me a bit but i'm gonna save you the time and money by letting u use a simple method that i'm using.

1. FOLLOW THE TREND! (if there is one)

2. Never take counter trend trades with as large a risk as a normal trade.
If i do take a counter trend trade, i usually use half my position size

3. Use a fixed risk rule, for me i risk 2% of my capital on every trade. SL size doesn't matter. It could be 20 pips or 150 pips. It will always work out to be 2% no matter what.

take for example, i have 10Grand and i see a nice fibonacci bounce trade but for it to be safe i would need a SL of 150 pips, what do i do to risk only 2%?

2% 0f 10,000 = $200.
so let 150*10*x=$200;
X=150*10 = (1500), then $200/1500= 0.13 lots.

If it was an 80 Pip required SL it would be

80*10*x=200;
x= 800/200
x=0.25 lots

so you see, the MM here is easy. You always risk 2% no matter what.


4. if you understand the above, then you are ready to trade . When i wake in the mornings, i open up my daily charts. i sweep over 10 or so pairs to see if any setups are available. If none are there, then i close my chart and check at end of day. DO NOT FORCE A TRADE, THAT IS OUTRIGHT GAMBLING!!

IF i spot a trade, i quantifiy the potential loss first. If the Loss in pips is too great for the trend, then i dont trade it.

5. Identifying trend the following opertunity.

The main entry i use for trend following is fibonacci bounce and to an extent, trend line bounce. i love Trend line trading opertunities as it often provides a high Risk to Reward ratio.

to see a fibo-trade, look on the chart below.
http://i12.tinypic.com/4pmahip.gif



If u look, you will realized the market was very obedient to the 38% fib number (62% for some depends on how u draw the fib).
I entered after seeing this on what would be a morning star formation. I placed my stop loss below a recent low for safety.

when riding this small trend movement, i canceled and replaced my Stop be placing it below the low of the previous candle. I did that until i was stopped out.

That trade won 312 pips, risking 102. if i had 10,000 that risk would be $200 @ 0.2 lots.

0.2 lots is $2 a pip, so 312 pips would have yielded $624 over a one week period.

Now i dont see why you would need a faster growth than that, if so, then use 4% risk and turn that 624 into $1248 which is more than 10% gain for the month already! imagine compounding that!



I hope this helps you my friend.

If u have time, look up price action on james 16 thread and also candlestick reversal formations.

In my opinion, if i had known all of this 1 year ago i would be a richer guy today
100% of traders are losers. Just that some win more than they lose!
  • #4
  • Jun 2, 2007 8:23am Jun 2, 2007 8:23am
Quote
How to trade forex the right way ??
In my opinion there's only ONE way that has worked out for me:

1) Identify markets with healthy trends
2) Analyze levels of significant support/resistance
3) Wait for price to retrace back to those levels
4) If they hold the retrace and price begins to resume the move in the direction of the main train, jump on board upon signal.
5) if they dont, stay side-lined.

So, basically, sell rallies in downtrends and buy dips in uptrends. It's the only bloody way I have managed to make money off the markets. All the other concepts and systems I have tried have miserably failed.
  • #5
  • Jun 2, 2007 8:25am Jun 2, 2007 8:25am
also, do yourself a favor and ignore totally Lagging indicators...

Moving averages
RSI (yes RSI!)
Stochastics
MACD

they might work but u need tons of practice with them,

For me, i tested them for over a year. I coded so many EA's and tested them and none of them works as good as it should.

Price action, and market psychology is all you need to know
100% of traders are losers. Just that some win more than they lose!
  • #6
  • Jun 2, 2007 8:26am Jun 2, 2007 8:26am
Quoting WTB
In my opinion there's only ONE way that has worked out for me:

1) Identify markets with healthy trends
2) Analyze levels of significant support/resistance
3) Wait for price to retrace back to those levels
4) If they hold the retrace and price begins to resume the move in the direction of the main train, jump on board upon signal.
5) if they dont, stay side-lined.

So, basically, sell rallies in downtrends and buy dips in uptrends. It's the only bloody way I have managed to make money off the markets. All the other concepts and systems I have tried have miserably failed.
WTB, i see you trading just like i do.
by the way, how long did it take you to figure this out? it took me One year of forex trading (which is pretty fast)
100% of traders are losers. Just that some win more than they lose!
  • #7
  • Jun 2, 2007 8:51am Jun 2, 2007 8:51am
Mr demark--do you only trade the daily chart? Thanks in advance.
  • #8
  • Jun 2, 2007 9:01am Jun 2, 2007 9:01am
Quoting Mr demark
WTB, i see you trading just like i do.
by the way, how long did it take you to figure this out? it took me One year of forex trading (which is pretty fast)
It looks crystal clear once you've realised, doesn't it?
My time scale -

  1. 2 - 3 months trading 5 & 15 min charts (all losses)
  2. 2 -3 months finding my way around the Web (all losses)
  3. 2 - 3 months reading (nearly) everything on FF (some losses)
  4. 3 months in Jim's PA thread (& fiji's stuff) (fewer losses)
  5. 1 month weaning myself off all the usual indicators (RSI, MACD etc) (fewer losses)
  6. 4 months trading MY method (no losses)

Time to up the ante and move to the next stage

  • #9
  • Jun 2, 2007 9:04am Jun 2, 2007 9:04am
Quoting IRISH37
Mr demark--do you only trade the daily chart? Thanks in advance.
Yes,

wanna know why?

lower time frames are noisier. Also, a trend on the daily is more solid and harder to reverse. Trends on the daily chart dont just change with one candle.

i agree that you trade less frequently but the bright side is, u lose less frequently as well.

Not holding any position in the market is a position also
100% of traders are losers. Just that some win more than they lose!
  • #10
  • Jun 2, 2007 10:44am Jun 2, 2007 10:44am
Quoting PeterFM
It looks crystal clear once you've realised, doesn't it?
My time scale -

4 months trading MY method (no losses)Time to up the ante and move to the next stage
Peter:

Did you post your method here in the forum?

Thanks
  • #11
  • Jun 2, 2007 11:09am Jun 2, 2007 11:09am
Mr. Demark,

Have you stopped testing the Derikfx method? You are saying not to use stochs, makes me think they didn't work out for you.

Thanks.

oo7_ts

Quoting Mr demark
also, do yourself a favor and ignore totally Lagging indicators...

Moving averages
RSI (yes RSI!)
Stochastics
MACD

they might work but u need tons of practice with them,

For me, i tested them for over a year. I coded so many EA's and tested them and none of them works as good as it should.

Price action, and market psychology is all you need to know
  • #12
  • Jun 2, 2007 12:22pm Jun 2, 2007 12:22pm
Quoting oo7_ts
Mr. Demark,

Have you stopped testing the Derikfx method? You are saying not to use stochs, makes me think they didn't work out for you.

Thanks.

oo7_ts
no, i didn't use the Direkfx method (what is that?)

but i have used indicators and they dont work like i want them to
100% of traders are losers. Just that some win more than they lose!
  • #13
  • Jun 2, 2007 12:36pm Jun 2, 2007 12:36pm
Price, Price, Price: Wisdom

Our understanding of the nature of markets is based on the hypothesis that people's expectations adjust at different times and manifest themselves in long-term price trends. These trends can be analyzed and exploited in our investment decision process. A second hypothesis is that prices eventually will reflect all relevant information. That is, anything that could possibly affect the market price of a commodity or financial instrument - including fundamental, political, or psychological factors - will be reflected in the price over time. Nevertheless, a study of market price, rather than market fundamentals, is the foundation for our analysis.
John W. Henry
Trend Followers don’t look at moving averages. Don’t look at relative strength, Elliott Waves, candlesticks, Gann, news stories, politics, fundamentals. None of that. You can always find charts in an up trend and 50 technical indicators that say it’s over bought and due for a sell off, yet the next day the market goes higher and higher, etc. The only technical indicator a Trend Follower follows is the price action. If you followed all those indicators and said to yourself, this market is over bought, I am going short, you lost money as the market went higher. As long as the price goes up, you stay with the trade.
Trend Follower Feedback
  • #14
  • Jun 2, 2007 2:56pm Jun 2, 2007 2:56pm
Sorry, I must have had a few too many. I mistook you for somebody else. The Derikfx systems is a system using multi time frame Stochs.

oo7_ts

Quoting Mr demark
no, i didn't use the Direkfx method (what is that?)

but i have used indicators and they dont work like i want them to
  • #15
  • Jun 3, 2007 10:50am Jun 3, 2007 10:50am
Quote
andimozza Hey Guys....

I've been wondering how we must trade forex
Andimozza,

You are fortunate to have such excellent replies to your post. If you keep things simple you'll save a load of time and $.

I began by learning trendlines and fib levels and was seein some success early on. Then I started learning indicators and never had good results. Then my pattern evolved something like Peter's. After two years I went back to my simple ways, except now armed with a better grasp of MM and what goes on beyond the trading platform--all of which can be learned here.

Now I'm seeing success again using simple methods. I hope simplicity will work for you as well. It's a lot less exhausting.

All the beest
  • #16
  • Jun 3, 2007 11:00am Jun 3, 2007 11:00am
Quoting Mr demark
let me share my recent "eureka" story.

i've read and watched countless of forex tutoring videos and they all helped me a bit but i'm gonna save you the time and money by letting u use a simple method that i'm using.

1. FOLLOW THE TREND! (if there is one)

2. Never take counter trend trades with as large a risk as a normal trade.
If i do take a counter trend trade, i usually use half my position size

3. Use a fixed risk rule, for me i risk 2% of my capital on every trade. SL size doesn't matter. It could be 20 pips or 150 pips. It will always work out to be 2% no matter what.

take for example, i have 10Grand and i see a nice fibonacci bounce trade but for it to be safe i would need a SL of 150 pips, what do i do to risk only 2%?

2% 0f 10,000 = $200.
so let 150*10*x=$200;
X=150*10 = (1500), then $200/1500= 0.13 lots.

If it was an 80 Pip required SL it would be

80*10*x=200;
x= 800/200
x=0.25 lots

so you see, the MM here is easy. You always risk 2% no matter what.


4. if you understand the above, then you are ready to trade . When i wake in the mornings, i open up my daily charts. i sweep over 10 or so pairs to see if any setups are available. If none are there, then i close my chart and check at end of day. DO NOT FORCE A TRADE, THAT IS OUTRIGHT GAMBLING!!

IF i spot a trade, i quantifiy the potential loss first. If the Loss in pips is too great for the trend, then i dont trade it.

5. Identifying trend the following opertunity.

The main entry i use for trend following is fibonacci bounce and to an extent, trend line bounce. i love Trend line trading opertunities as it often provides a high Risk to Reward ratio.

to see a fibo-trade, look on the chart below.
http://i12.tinypic.com/4pmahip.gif



If u look, you will realized the market was very obedient to the 38% fib number (62% for some depends on how u draw the fib).
I entered after seeing this on what would be a morning star formation. I placed my stop loss below a recent low for safety.

when riding this small trend movement, i canceled and replaced my Stop be placing it below the low of the previous candle. I did that until i was stopped out.

That trade won 312 pips, risking 102. if i had 10,000 that risk would be $200 @ 0.2 lots.

0.2 lots is $2 a pip, so 312 pips would have yielded $624 over a one week period.

Now i dont see why you would need a faster growth than that, if so, then use 4% risk and turn that 624 into $1248 which is more than 10% gain for the month already! imagine compounding that!



I hope this helps you my friend.

If u have time, look up price action on james 16 thread and also candlestick reversal formations.

In my opinion, if i had known all of this 1 year ago i would be a richer guy today
I like your simple direct approach.

I'm working on something similar.

I like fibs, but I had about decided they were arbitrary and subjective.

Reason being there are always several swing lows/highs to base them from. You can always find one that will show an acceptable retrace.

Do you have any guidelines about choosing important highs or lows?

Thank you
  • #17
  • Jun 3, 2007 11:25am Jun 3, 2007 11:25am
Quoting winterwhite
Peter:

Did you post your method here in the forum?

Thanks
No I haven't, for the simple reason that like many methods, it's a method not a system.
Also it's not a way that I could say to anyone..'Here's a simple Xover that tells you go long now, go short now'.
Most of the stuff I do is based on Jim's PA stuff (found here) and modified to suit me.
I take my cue from the daily/weekly charts, particularly looking for pullbacks from the main trend to points of support/resistance and then to place buy/sell stops to pick price up again as it returns to the core trend.
I haven't placed a market order for I don't know how long, and this one factor has made the most difference to my balance.
I'll admit I miss pips when price is retracing against the trend, but I'm in that happy state of equilibrium where I couldn't give a s**t.
I also have anything up to 12-15 pairs trading at the same time, sometimes with multiple positions, and this is not something that is easy to ask a newcomer to FX trading to take on board, even if they have extensive trading in other areas.
My way, with small lots, and normally NO stops, is designed to prove to me that the core of my method works, and with a shotgun approach is fraught with danger. But, if I can keep ending up positive over the next few months I will have had time to learn which set-ups are really the best for long-term trading.
I'm sorry I can't be more explicit. It's not 'cos it's anything wonderful, but purely a distillation of all the simplest approaches I could find on FF.
  • #18
  • Jun 4, 2007 11:33am Jun 4, 2007 11:33am
and one more thing, dont trade other people's signal until u re-evaluate it for yourself.

if u hear someone says "pinbar on USDCAD" dont just jump and go trade.
(speaking from experience)
100% of traders are losers. Just that some win more than they lose!
  • #19
  • Jun 4, 2007 11:53am Jun 4, 2007 11:53am
Quoting Mr demark
also, do yourself a favor and ignore totally Lagging indicators...

Moving averages
Holy crap, do I disagree with that. My whole system is designed around 3 simple moving averages and price action around them...
  • #20
  • Edited 2:40pm Jun 4, 2007 12:08pm | Edited 2:40pm
Quoting andimozza
Hey Guys....

I've been wondering how we must trade forex

well we all know there are a lot of fancy indic here in FF
and a lot of systems also.....

but do u really think that all the big player out there using this similiar kind of stuff like we do ??

are they using any indicator on their trade ?
or their simply using trendline, fib, S/R ??


cuz i've heard a lot of people say if you want to trade then K.I.S.S

so what is the real matter in trading anyway ??
is it indic that create a systems ?
is it MM ?
is it yourself ??
is it the trading tools you use ??
is it the price action ?

cuz if you mix all of it then it would not be simple anymore, it will be far away too complicated to understand.... and don't forget the subjectivity on using one of those

so please give me some advice
i've been trap in confusion lately......

thx
Here's a starting point. (See image and pick out where you would have liked to enter)

  1. Decide your timeframe (Mr demark & I prefer daily charts)
  2. Add a couple of long-term MAs (to show core trend)
  3. Wait for pull-backs towards the MAs (Using the same MAs it is worth seeing how price reacts on 4hr charts on these pullbacks)
  4. Wait for signs that the retracement is weakening
  5. Look for other shorter-term S/R zones near price
  6. Place buy/sell stops above/below those areas
  7. Never risk more than 2% (0.5 - 1% would be better while you master this)

Once you've got a grip on how to enter trades, with sensible Stop loss settings (Remember .. bigger stops = smaller lots), then you need to understand profit-taking. Exits are the most important thing to learn next. This is the advantage of starting out with a demo account, or trade very small lots on a micro account).

When you've come to terms with this style of trading you won't need any indicators, you'll learn to see the bars/candles and what they are telling you.

Even the MAs are a crutch that some of us still need. I long to be good enough to clear my screen of everything.

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